Top Ten Tax Write-Offs for the Self-Employed

As tax season is now quickly approaching, there are a few considerations that those who are self-employed should address. While filing taxes before the April 15th deadline can be a bit challenging, it is also important to recall that Canadians who work for themselves can enjoy some substantial benefits in the form of write-offs. So, let us take a look at the ten most common (and perhaps most overlooked) that need to be taken into account.

A Home Office

Those who work from home can actually claim a home office on their returns. Still, there are two considerations that need to be taken into account. First, this office must be regularly used as a standalone place for business. Secondly, you must also meet with clients or customers in this office.

Personal Health Insurance

A good amount of savings can arise from health insurance premiums for those who are self-employed. In general, you will able to write these premiums off so that they will meet or rise above any profits that were generated by your business during the tax year. Still, it is important to recall that this would be in the form of a reduction of your adjusted gross income as opposed to against the income from your business.

Retirement

Believe it or not, you will also be able to claim credits against your self-employed retirement plan (SEP). Once again, the same principle will be involved that we have just seen in personal health insurance; the deduction would arise from your gross income as opposed to your business income.

Travel Mileage

Another frequently overlooked deduction arises from the mileage that you may have driven for business purposes during the previous tax year. For this year, you can claim 56 cents for every mile you have driven. As you may have suspected, you would need to have kept an accurate log to claim this deduction.

Educational Write-Offs

If you can prove that any educational courses have helped you to advance in your business, these can also be claimed. These can include (but may not be limited to) books, classes, online courses, e-books and even travel expenses to and from a certain school or seminar.

Entertainment or Meals

This write-off should be taken with caution, as you will only be able to deduct these expenses if they can be proven to have benefited your business. So, an example of this could be meeting a client for a business lunch. However, taking yourself out for drinks on a Friday evening will not qualify.

Supplies for your Office

You may already be aware that all expenses that are directly related to the day-to-day functioning of your office can be written off. These can include paper, pens, computers, furniture and even cleaning supplies. However, electronic devices such as a laptop will only qualify if they are used at least 70% for work-related activities.

Utility Bills

You will be able to write off a utility such as a landline, but it must be proven that the line was solely dedicated for business use. Another example would be the Internet supplied to your home office. Still, this may be tricky and the CRA may indeed ask for proof of this case. So, be ready to have records available upon request.

Additional Travel Expenses

Although we have already seen that mileage can be deducted to a point, there are other expenses that can likewise be mitigated. These include parking fees, plane tickets, train reservations and tolls. As always, it must be proven that these were work-related.

Marketing and Advertising

Any item that is related to the promotion or exposure of your business can likewise be counted as a write-off. These can include business cards, newspaper adverts, trade events, online paid platforms and website expenses. As always, you will need to prove that these expenses were directly related to the performance of your business.

Finally, you will also be able to utilize a massive write-off through your payroll. This will entirely depend on the size and scope of your business. For instance, you may be involved in the manufacturing industry. In this case, it is likely that the cost of the goods and their shipment will be the main source of your write-offs.

It should also be made clear that unless you have detailed proof of the aforementioned expenses and their relation to your business, it is not worthwhile claiming any write-offs through them. Keeping a spreadsheet and accurate files is critical should the CRA require any further documentation.

Eric La CaraManaging Partner and Tax Practice manager for Capital Tax in Vancouver and Tokyo. Eric is a U.S. and Japan Personal & Corporate tax specialist with more than 15 years of experience in the area of cross-border structuring and taxation. Eric is charged with developing Capital Tax overall operations and strategic direction using the business and technical skills he has acquired during his professional career in Asia.